How to Start a Franchise Business? - Types of Franchise and Benefits

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How to Start a Franchise Business? - Types of Franchise and Benefits

In India, you have definitely seen the franchises of different brands near you such as Mcdonald's, KFC, Bata, Ven Husen, Domino’s, etc. In these franchises, similar products are available at all the stores of a particular brand. For instance, in Bata, the collection and pricing are similar across all the stores and the taste of Domino’s pizza at every franchise will be similar.

If you're considering launching your own brand in India, the legal experts at Registraionwala can provide assistance with the startup registration.But do you think, why people opt for these brands instead of starting their own brand? Here in this article, we will discuss why businesses choose franchises and how they can be started in India.

What is a Franchise Business?

A franchise is a part of a main brand which is started by an individual/ entity by paying royalty fees to the franchisor. In a franchise business, there are two parties, one is called ‘franchisor’ and the other is ‘franchisee’. 

Franchisor: A franchisor is a person/ entity who owns the brand and all the legal rights. They have a successful running brand in the market with brand value. People came to that brand for quality in a particular segment. For example: Zara and H&M are famous for their fast fashion, so these are the choices for influencers.

Franchisee: The franchisee is a person who is looking to open a business by the name of the franchisor’s brand. Both, parties came to an agreement before opening a franchise store. This agreement is called a ‘Franchise agreement’ in which all the rules and regulations are mentioned which both parties have to follow.

Why Start a Franchise Business?

In a market, franchise of every business is available from food to jewellery to clothing and education. Multiple options are available to choose from as per your budget. Before starting a franchisee you have to choose a type of business and budget. After that look for options available in the market. 

• In starting a franchise, you don’t have to start a business from scratch. You will get the pre-established brand, business model and customer base. Basically, this model is followed by big brands which allow others to use their brand, business model, and other intellectual property in exchange for a fixed amount every month called “franchising fee.”
• You get the ready-made business formula that has market-tested products and services, and an established brand.
• At the start, the franchisor will provide help in finding a location, acquiring and training the staff. Remember, the company will analyse your business operation thoroughly as the company is making a long-term partnership with you.
• A pre-made business plan is already available such as how the workplace will look, the products used, the program menu, royalty and so on.

Types of Franchise Business in India

Below are the franchises of businesses that can be started in India:

Product Franchise: These are product-based franchises, also known as Distribution franchises. In this, the franchise distributes similar products to the parent company, it is done to provide the exact product to the customers.

Investment Franchise: These franchises usually require large capital investments such as hotels and large restaurant chains. In this, the franchisee invests the money, hires a management team of their own or the franchisor to run the business generates a return on investment and gets capital gain upon exit.

Business Format Franchise: In this type the franchisor not only provides the trade name, products and services to the franchisee. But also provides an entire system for operating the business. In this, both the initial training and assistance are provided to the franchisee. It is the most common type of franchise system.  

Job Franchise: These franchises are basically home-based which helps in reducing the overhead costs. As their business grows, they hire employees and step back from their daily operations. The cost is really low, so it can be started without any financial obligation or property leases.

How to Start a Franchise Business?

In a market, there is no particular way of starting a franchise business. You have to particularly look for the option which your desired franchisor follows to provide franchises. Basically, the franchise options and forms are available at the website of the company or you can simply search it on Google. For example: if you want the franchise of Domino’s then you have to drop a direct mail to the company at dominos.franchise@jublfood.com. After dropping the mail, you will get updates only your mail for the further process.

If you want a franchise of KFC, you need to fill out a form available on the official website. You need to fill in the basic details such as your name, mobile number, current business name, year in which business starts, state, city, district, and pin code.

Below are five key requirements that you need to consider to start a franchise business in India:

1. Conduct market research, which involves learning about franchising in general and selecting a franchise that meets your needs.
2. Get a deep understanding of the industry you plan to start a franchise. This means learning about the legal framework, regulations, human resource quality, best industry practices, direct competitors, collaborators, associates, market cycles, and more. 
3. Having seed funding or capital money to invest in the franchise, as this is a cash-intensive business. You'll need to finance the setup of the brand's outlet, hire staff, and cover operational costs. 
4. Choosing a location is also important, as it involves more than just finding a physical address. Depending on the business, you may need to buy or lease space, and the franchisor can help advise on the best locations. 
5. A franchise agreement is the last and essential point, as it's a contract between the franchisor and franchisee that outlines the key points of the arrangement.

Conclusion

To conclude, in franchise businesses the franchisor and franchisee both get benefits. In India, starting a franchise is one of the most profitable and popular business ideas. Small and large corporations came into the franchise business to earn royalty fees and develop their brand. But most of the time, the success of the franchise depends on brand name, recall value, covered market, etc. So, if you want to succeed in the franchise business, understanding all the aspects is important.

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